WGU D104 INTERMEDIATE ACCOUNTING
II CERTIFICATION SCRIPT 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
◍ What is true about depletion expense?.
Answer: It is usually part of cost of goods sold.
◍ What is the prudent cost concept?.
Answer: If a company pays too much for an asset, the excess should be
charged as a loss immediately rather than capitalized.
◍ Flannery Corporation owns machinery with a book value of $520,000. It is
estimated that the machinery will generate future cash flows of $465,000.
The machinery has a fair value of $415,000.Which amount should Florence
recognize as a loss on impairment?.
Answer: $105,000An impairment is recorded when an asset fails the
recoverability test. If the expected future cash flows is less than the carrying
amount, the asset is impaired. The amount of the impairment is the fair
value of the asset less the book value. If the fair value of the asset is not
known, the present value of the expected cash flows can be used to
determine the fair value. The journal entry to record the impairment is:
Debit Loss on Impairment; Credit Accumulated Depreciation. An
impairment exists on this asset since the expected future cash flows is less
than the book value of the asset. Since the fair value of the asset is known,
Flannery Corporation will record an an impairment journal entry of: Debit
Loss on Impairment $105,000 ($520,000 - $415,000); Credit Accumulated
Depreciation $105,000.
◍ What disclosures are required for intangible assets?.
Answer: Aggregate amortization expense for the next five years,
accumulated amortization (if not separately shown), and changes in
, goodwill carrying amount.
◍ What are qualifying assets for interest capitalization?.
Answer: Assets requiring time to prepare for intended use, such as buildings,
plants, or large discrete projects.
◍ What are the two viewpoints on cash discounts if not taken?.
Answer: (1) Always reduce asset cost since true cost is the cash price, (2)
Do not reduce asset cost if not prudent or terms are unfavorable.
◍ How are additions accounted for?.
Answer: Capitalized, because a new asset is created.
◍ A company wants to calculate a loss on impairment on an asset. How is the
loss calculated?.
Answer: Carrying value less the fair value
◍ McDonald Company acquired machinery on January 1, 2015 which it
depreciated under the straight-line method with an estimated life of fifteen
years and no salvage value. On January 1, 2020, McDonald estimated that
the remaining life of this machinery was six years with no salvage
value.How should this change be accounted for by McDonald?.
Answer: By setting future annual depreciation equal to one-sixth of the book
value on January 1, 2020
◍ What are customer-related intangible assets?.
Answer: Assets resulting from interactions with customers, such as customer
lists, order backlogs, and customer relationships.
◍ Avoidable Interest.
Answer: the amount of interest cost during the period that a company could
theoretically avoid if it had not made expenditure
◍ Where are gains or losses from disposal of plant assets reported?.
Answer: In the income statement as part of customary business activities.
◍ How can the composite or group depreciation system be described?.
Answer: A straight-line rate is computed by dividing the total of the annual
, depreciation expense for all assets in the group by the total cost of the assets
◍ What is the purpose of capitalizing interest?.
Answer: To include total acquisition cost of an asset and allocate it to future
periods that benefit.
◍ How is capitalized interest reported?.
Answer: As part of the asset's cost and later expensed through depreciation,
with disclosure in financial statements.
◍ What method is used if the usage pattern of an intangible cannot be
determined?.
Answer: The straight-line method of amortization.
◍ When does the capitalization period begin?.
Answer: When expenditures are made, construction activities are in
progress, and interest is incurred.
◍ How is a gain or loss on sale of a plant asset determined?.
Answer: By comparing the asset's book value to the proceeds received.
◍ How are lump-sum purchases of plant assets valued?.
Answer: Allocate the total price among assets based on their relative fair
values.
◍ How should costs of tearing down an old structure for an addition be
treated?.
Answer: If anticipated, capitalize as part of the addition; if not anticipated,
expense as a loss.
◍ What is the book value of a plant asset equal to?.
Answer: The asset's acquisition cost less the total related depreciation
recorded to date
◍ What is an impairment?.
Answer: A write-off recorded when the carrying amount of a long-lived
asset is not recoverable.
◍ How should property acquired by issuing stock be valued?.
II CERTIFICATION SCRIPT 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
◍ What is true about depletion expense?.
Answer: It is usually part of cost of goods sold.
◍ What is the prudent cost concept?.
Answer: If a company pays too much for an asset, the excess should be
charged as a loss immediately rather than capitalized.
◍ Flannery Corporation owns machinery with a book value of $520,000. It is
estimated that the machinery will generate future cash flows of $465,000.
The machinery has a fair value of $415,000.Which amount should Florence
recognize as a loss on impairment?.
Answer: $105,000An impairment is recorded when an asset fails the
recoverability test. If the expected future cash flows is less than the carrying
amount, the asset is impaired. The amount of the impairment is the fair
value of the asset less the book value. If the fair value of the asset is not
known, the present value of the expected cash flows can be used to
determine the fair value. The journal entry to record the impairment is:
Debit Loss on Impairment; Credit Accumulated Depreciation. An
impairment exists on this asset since the expected future cash flows is less
than the book value of the asset. Since the fair value of the asset is known,
Flannery Corporation will record an an impairment journal entry of: Debit
Loss on Impairment $105,000 ($520,000 - $415,000); Credit Accumulated
Depreciation $105,000.
◍ What disclosures are required for intangible assets?.
Answer: Aggregate amortization expense for the next five years,
accumulated amortization (if not separately shown), and changes in
, goodwill carrying amount.
◍ What are qualifying assets for interest capitalization?.
Answer: Assets requiring time to prepare for intended use, such as buildings,
plants, or large discrete projects.
◍ What are the two viewpoints on cash discounts if not taken?.
Answer: (1) Always reduce asset cost since true cost is the cash price, (2)
Do not reduce asset cost if not prudent or terms are unfavorable.
◍ How are additions accounted for?.
Answer: Capitalized, because a new asset is created.
◍ A company wants to calculate a loss on impairment on an asset. How is the
loss calculated?.
Answer: Carrying value less the fair value
◍ McDonald Company acquired machinery on January 1, 2015 which it
depreciated under the straight-line method with an estimated life of fifteen
years and no salvage value. On January 1, 2020, McDonald estimated that
the remaining life of this machinery was six years with no salvage
value.How should this change be accounted for by McDonald?.
Answer: By setting future annual depreciation equal to one-sixth of the book
value on January 1, 2020
◍ What are customer-related intangible assets?.
Answer: Assets resulting from interactions with customers, such as customer
lists, order backlogs, and customer relationships.
◍ Avoidable Interest.
Answer: the amount of interest cost during the period that a company could
theoretically avoid if it had not made expenditure
◍ Where are gains or losses from disposal of plant assets reported?.
Answer: In the income statement as part of customary business activities.
◍ How can the composite or group depreciation system be described?.
Answer: A straight-line rate is computed by dividing the total of the annual
, depreciation expense for all assets in the group by the total cost of the assets
◍ What is the purpose of capitalizing interest?.
Answer: To include total acquisition cost of an asset and allocate it to future
periods that benefit.
◍ How is capitalized interest reported?.
Answer: As part of the asset's cost and later expensed through depreciation,
with disclosure in financial statements.
◍ What method is used if the usage pattern of an intangible cannot be
determined?.
Answer: The straight-line method of amortization.
◍ When does the capitalization period begin?.
Answer: When expenditures are made, construction activities are in
progress, and interest is incurred.
◍ How is a gain or loss on sale of a plant asset determined?.
Answer: By comparing the asset's book value to the proceeds received.
◍ How are lump-sum purchases of plant assets valued?.
Answer: Allocate the total price among assets based on their relative fair
values.
◍ How should costs of tearing down an old structure for an addition be
treated?.
Answer: If anticipated, capitalize as part of the addition; if not anticipated,
expense as a loss.
◍ What is the book value of a plant asset equal to?.
Answer: The asset's acquisition cost less the total related depreciation
recorded to date
◍ What is an impairment?.
Answer: A write-off recorded when the carrying amount of a long-lived
asset is not recoverable.
◍ How should property acquired by issuing stock be valued?.
